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Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's Interim Report January to June 2019. [Operator Instructions] I must advise you that this conference is being recorded today, Friday, the 19th of July 2019. I would now like to hand the conference over to your speaker today, Thomas Heath. Please go ahead, sir.
Thank you very much, operator. Good morning and welcome, everyone, to Sinch AB's Q2 2019 Conference Call. My name is Thomas Heath, I'm Chief Strategy Officer and Head of Investor Relations. With me on the call today, I have our CEO, Oscar Werner; and our CFO, Roshan Saldanha. And with those welcoming remarks, I'll pass the word over to Oscar.
Thank you, Thomas. And so welcome to this call for the Q2 report. And so I will start at the Slide 2, our first slide, Sinch at a glance. And so that said, we've seen this slide a couple of times. But just to repeat for any newcomers, so our main business is delivering customer engagement through mobile technology. We have a scalable cloud communications platform for messaging, voice and video. So basically, by reaching people on the mobile phone, you can engage -- or our customers can engage their customers or partners or employees via messaging, voice and video services. Interesting thing about this market that always strikes me is it's got 100% consumer penetration. I've yet to meet one single person that is not a user, that is everyone that I've met so far have either used mobile technology to make a call to the doctor, to call their favorite taxi service app or to receive messages to -- for web check-in or something like that. It's very, very broad penetration at the scale of mobile phones. It's a growing global multibillion-dollar market. It strikes me as well that whatever country you go to, these type of services are used by a very large number of enterprises. We serve 8 out of 10 of the largest U.S. tech companies, so we're serving the -- some of the big -- absolute biggest companies in the world, and we've done that organically from Sweden due to a very high quality of service. So when somebody wants to deliver these type of services at a global scale with very low latency at very high quality, then we are one of the absolute top choices. We're also do software for mobile operators based on the same underlying platform. So then let's move to next slide, growth markets. So the market continues to grow, and that is apparent in pretty much all the categories. We got the messaging market, which is our -- even though we're present in messaging, voice and video, our biggest portion of our revenue is in messaging. So the messaging market is a $17 billion market as of today, and it's growing. It's growing actually both on the text messaging side, but also on the newer forms of messaging, the rich messaging formats or RCS, OTT channels. There are various reports showing different growth rates in that, but it's definitely a growth market. And then we got what's called CPaaS, that is more the Software as a Service on top of the communication channels, which is projected by pretty much all parties to grow at very rapid rates. So we're at the intersection of the CPaaS Software as a Service. We're adding more software on the messaging side, which is growing both on the base, text messaging, but also on the new formats. So market-wise, we're in a good spot. All right. Go to next slide, so April to June 2019. So we saw gross profit rise with 29% up to SEK 321 million from SEK 248.6 million, so that's a healthy growth, so that we're happy with. We saw adjusted EBITDA rise with 17%, up to SEK 114 million from SEK 97.4 million, so we're also happy about that. And adjusted EBIT, exclude the acquisition-related amortization, to SEK 104 million. So you can see that the -- our EBITDA to EBIT conversion is high, if you exclude the acquisition-related amortizations. And the profit after tax being SEK 53 million. And there, you obviously have the acquisition-related amortizations. In local currency, our gross profit growth, 26%. So a little lower effect on currency this quarter. This is also a clean quarter from an M&A perspective. And as we said, many quarters now, we are making continuing investments to capture new market growth opportunities, and that affects our earnings before these new initiatives translate into higher revenues and gross profits. The logic here is very simple. We see a very good growth market. We see a lot of growth opportunities in the newer formats and in the more SaaS-related software. So therefore, given that we have a strong trajectory, we think it's good to invest in those areas in order to set us up for a very solid growth in the coming years. That's the very simple calculation. If we move on to the next slide, to the key growth drivers. So we have 4 main growth drivers today, and one is the rising message volumes with the U.S. large -- with the large U.S. tech companies, a big growth driver for us. We see our growth in personalized video. This is one of the areas of the newer formats where we are definitely the leader. And we see strong traction with a large number of brands in this area, and we're investing in order to continue growing at rapid rate. We see, as we have seen in previous quarters, a strong growth in voice and video. So that's also an area where we invest and serve very large customers. And we see the operator business doing well and has been doing for some time, but it's -- I'm happy to see that it continues to do well. So that's our current main growth drivers, and that we're working on a couple of others for the future in order to set us up for future growth.If we then move on to the investment areas to explain a little bit with what we are doing and where we are investing. So we got, obviously, when you're growing gross profit with 25%, you have to grow the organization just to keep up with the new number of client wins and the new traffic and volume. So that's a basic area, which you don't cover on this slide, but that's obviously true. But if we look a little bit more to the forward-looking investments, they fall into 3 main categories. One area is just operational efficiency where we invest in our own systems. It's internal automation for improved scalability. It is improving our COGS, and it's improving automation for our certain clients with client self-service tools. And that's a relatively large area for us. We see at the growth rates we have, we need to continue to invest in our own scalability in order to have a good scalable business going forward. Then we are investing in sales and marketing. We've done the new brand, but it's also -- we're now focusing efforts a lot more to strengthen lead generation to generate more leads and into our sales force. We are investing in international expansion of the personalized video products. We see the first launches now in Europe, and this is a U.S. acquisition, [ Vehicle ]. And we have brought it over to Europe, so we see the first launches with operators and customers in Europe of the personalized video products, which is very strong. And we also see how we can bring a technology from one area where we made technology investments and bring it out to other markets. We see the proof points of that and how effective that is right now, which we're very happy with. We have a greater focus on new sales in Europe, so adding a new sales team and being more aggressive on outreach on to new customers into Europe. And we're investing in geographic expansion into Asia where we have local sales teams in China and a couple of other countries where we see good opportunities in the market.And the third area is new technology. So software for advanced, interactive messaging such as RCS, OTT, WhatsApp, et cetera. New channels like WhatsApp and RCS -- sorry, the first point is this is both investing in channels and in the way to handle an interactive conversation over messaging. So our previous -- or our current base is very much notifications and one-way messages, and we're seeing the markets now turning into conversations. So consumers are starting to answer on the outbound messages, and that requires a more advanced software to handle those responses in a good way for our customers. And we're also investing in RCS-as-a-Service for mobile operators. So that's the 3 main areas where we're making investments in forward-looking apart from just supporting obviously the gross profit growth. So operational efficiency, sales and marketing and new technology, and we think all of those will drive to -- into our bottom line in the medium to longer term. If we move on to next slide, so continued growth in messaging. So we see rising message volumes this quarter as well, and we see higher growth on the gross profit side and in transactions, which was -- we'll see on next slide, where we see rising message volumes. We see the U.S. tech companies fueling growth, and we see personalized video fueling growth. And we see that we are investing in the next-generation messaging as the plan we have communicated and have for quite some quarters now. And again, the reason is very simple, we just see very rapid growth in the new areas, and I think it is responsible of us to invest in those areas in order to capture that type of growth.On the next slide, the rising message volumes. We're growing both with existing customers, new customers and new use cases. This quarter, we see a 7% organic growth in transactions. But on the other hand, we see a 22% organic growth in gross profits. So this is the move to more -- we're on a track to move to more advanced messaging and more value-add. And as we can see, the customers we win and the -- where the highest amount of growth is, in our base right now, is in the higher-value transactions and where the lower amount of growth is in the lower-value transactions. And therefore, you see it's skewed then here to higher growth in gross profit and lower growth in transactions, which is to be expected -- and to be expected. So we're focusing more on the higher value than on the wholesale part of our business. If we then go on to the next slide, to the gross profit per transaction. So this is painting in the same picture. So the gross profit per transaction is growing and has been growing for quite some quarters. And then we see the OpEx per transaction is also growing. As we're investing in the new services, we get more software to sell and we do more advanced things. And then both of those curves are growing. Both of them are also affected by FX effect, of course. Specifically, the GP per transaction is rising due to us investing and growing faster than average on the personalized video, and we also have a currency tailwind and increased traffic to profitable markets. So going into the harder-to-serve markets, we can generally make more money per transaction than we can in the easy-to-serve market. And now we're serving global companies in a lot of hard-to-serve markets. We're proving good to do that, and therefore, the gross profit grow as well as the new services.Next one, the OpEx investments to capture growth. So this is a graph where we think it's very powerful. This is the messaging EBITDA per gross profit. So we are around -- between 40% and 50% of the gross profit we generate, turn into EBITDA. I think this shows very well the scalability in our business. It's a very strong metric, which we're happy with. And you see here that the revenue and gross margin depend on the mix of the terminating markets. So when we have the good mix of terminating market, this graph goes up. And this EBITDA per gross profit shows margin excluding the mobile operators charges, so this is the clean margin. And as you can see a little bit on the slide, the growth initiatives weigh on the profitability before they translate into high revenue and earnings. But I think this slide is strong, and it shows a little bit of the trend that we've been talking about in the previous slides as well.If we move on to the next, so voice and video. We see high growth in voice and video. As you can see, continued growth in Q2. Well, we're turning on the clients that we have won. And we're also seeing, as you can see, on the EBITDA side, we are, given the rapid rise in revenue and transactions, we need to invest quite a bit in this area in order to keep up with the customers that we have signed. So this is a core focus here. So like you know, we work harder to turn this into profit. We have signed a set of very large customers. And when those customers are ramping their traffic, we need to work hard in order to expand into new markets and able to keep the high quality of service. So that's what we see on the EBITDA front there, where we just need to make sure we have good quality of service and follow our customers into new markets in this type of direct brand.And if we look on the next slide here, the operators. So we also have a healthy profit in operators. We've had an improved conversions of order to sales. In this type of business, as you know, it's a fluctuation -- quarterly fluctuations as projects are realized, and we are investing in RCS-as-a-Service for mobile operators. But generally, the trajectory here has been good and we see a -- and has been good in the previous quarter, and we see a good pipe going forward as well. With that said, I'm going to leave over to Roshan to do a little bit of a deeper dive into the Q2 financials.
Thank you, Oscar. And good morning to all of you, taking time on this summer day to join us on this call. Turn to Page 14 for the condensed income statement. This was a stable quarter with no extraordinary items in the income statement. Consolidated net sales grew by 18% in the quarter to SEK 1.177 billion. The growth rate in the quarter was positively affected by the movement of the Swedish kroner, primarily against the euro. The organic growth of net sales in local currency was 15%. EBIT came in at SEK 73 million versus SEK 40 million in the same period previous year. Acquisition-related amortization, which does not affect cash flow, was SEK 31 million. This amortization relates mainly to planned amortization of acquired brand, customer and operator relationships as well as software. Adjusted EBIT, which excludes both items affecting comparability and amortization of acquisition-related intangible assets, amounted to SEK 104 million, which gives I think a better reflection of our strong cash flow generation capability in the business.Moving on to Slide 15. Slide 15 shows a bridge explaining our underlying gross profit development. A significant part of our revenues are passed on as cost of goods sold to mobile operators. We pay them to send the messages and place calls, but the rates they charge vary greatly between markets. Since passthrough revenues do not contribute to our profits, we focus almost exclusively on gross profit when we assess and steer our business. Changes in our gross margin often reflects changes in geographical mix rather than underlying performance or competitiveness. This bridge explains the different components in our gross profit growth and the organic growth in local currency in comparable units. We have had no acquisitions since the second quarter of 2018. Consolidated gross profit rose by 29% during the quarter to SEK 321 million. Positive exchange rate movement explain SEK 9 million or 3% of this increase. So organic growth in gross profit in local currency in comparable units was 26%, which we believe is a very strong development in line with the previous trends. Organic gross profit growth was 22% in the messaging segment, contributing SEK 45 million; 100% from a small base in the voice and video segment, contributing SEK 11 million; and 26% in the operator segment, contributing SEK 8 million. In messaging, the growth is coming both from a shift in mix of our customer base to more enterprise customers, which has been a focus of the company to drive, as well as from newly added products such as personalized messaging through the acquisition of Vehicle in 2018.Moving on to Slide 16. Slide 16 shows the scalability in our growth within the messaging segment. We grew volumes by 7% year-over-year, which also reflects a shift in our customer base as we gradually increase our enterprise customer base as well as grow more with our existing enterprise customers, whereas our wholesale customer base continues to be stable to slightly weak. This is reflected in our revenues, which grow faster organically than the volumes as we sell more software and value through, for example, personalized messaging. We can also add differentiation and quality to our service delivery through offering different routing options. Finally, this shift is most visible in our gross profit, which reflects the higher value-add that we deliver to our customers. Serving more demanding customers and being able to deliver traffic globally at a high quality through our super network has made this gross profit growth possible. Oscar earlier talked about investing for continued growth and highlighting the main areas of growth being driving internal operational efficiency and quality, increasing our sales and marketing efforts as well as investment in new technology. Please turn to Slide 17 to see a summary of the number of resources at Sinch. I would like to talk about the size of our investment as a company and what we believe will deliver growth during the coming periods here. Our headcount is distributed in many different locations across the globe, but the majority of our resources are situated in Sweden, with the U.S.A., Poland and U.K. being other locations with significant concentration of resources. We have grown headcount in the company with 23% during the previous 12 months. Please note that these numbers are quarterly averages. A lot of work that is being done is to support our gross profit growth in the current periods, but there are also investments in the areas that Oscar described earlier. These investments are taken through our income statement as OpEx, and we have very limited capitalization of resource costs, which I believe to be a prudent handling. We also continue to maintain our financial targets of growth in adjusted EBITDA per share by 20% per year and are using part of the current growth in gross profit to secure growth in the coming periods, as has been stated previously. Please turn to Page 18 for the cash flow statement. Cash flow from operating activities was SEK 130 million in the quarter. Change in working capital fluctuates from quarter-to-quarter. I think it was negative previous quarter and it's positive this quarter because many of our customers maximize their liquidity by postponing payments to suppliers at quarter end. Actual customer losses remain very low at 0.05% and cash flow in relation to operating profit is slightly improving over time. Net debt at the end of the quarter amounted to SEK 441 million, down from SEK 484 million at the end of the first quarter this year. The implementation of IFRS 16 on 1st January 2019 has increased the company's net debt by SEK 84 million, as we also informed at the end of the first quarter. In addition, the company has made a payment of $8 million or SEK 74 million, which is reflected on the line acquisition of subsidiary in the statement, which relates to the earn-out process from the acquisition of Vehicle a year ago. Net debt to EBITDA is at 1.0. With the previous accounting principles before IFRS 16, the net debt to EBITDA would be 0.9, down from 1.4 a year ago. We have also previously received questions regarding the differences between our operating result or adjusted EBITDA and cash flow before changes in working capital. Hence, we are now adding a bridge on Slide 19 to explain the effects between these items. We have no nonrecurring items this quarter, and hence, our adjusted EBITDA and reported EBITDA are both at SEK 114 million, giving a margin -- EBITDA margin of 9.7%. From this, the most important items to deduct are, of course, our finance net, which is the net of finance income and finance expenses as well as paid taxes. Paid taxes can vary between quarters depending on the local practices in individual jurisdictions. In Q2, we have the effect of tax payments in the U.S. each year. In addition to this, we have the effect of unrealized exchange rate differences, both on operating activities as well as in our intercompany and external borrowing. These are minor in the quarter. But as you can see for Q2 2018, they can vary between quarters. Hopefully, this bridge and this page gives you some additional insight into our cash flow from operations. Finally, Slide 20 summarizes our financial targets. The financial targets for the company are unchanged from what we have previously stated, where we aim to grow adjusted EBITDA per share by 20% per year and maintain net debt below 2.5x adjusted EBITDA over time. Measured on a rolling 12-month basis, we grew adjusted EBITDA per share by 41% in this quarter. Net debt to EBITDA was down at 1x -- down from 1.4x a year ago. So with that comment, I would like to hand back to Oscar to summarize the presentation.
So as you've seen, we're in a good market and we're focusing now on delivering results now at the same time as setting ourselves up for the future. And so if we look forward on the future and we continue to have a strong pipeline with U.S.-based global tech companies and both growing with existing customers and targeting new. We have a larger Sinch organization as a result of these investments. And now we see that we have teams in place, larger amount of people focusing on new sales, which we are seeing starting to generate leads, which we're -- have not seen in the numbers yet. We see them in the cost numbers, of course, but we don't see them in the revenue numbers in a measurable way. But we see they are in place, and we're very happy with them. So we believe that's going to drive future growth for us for the future. As you can see, this point is new on this. We did believe a couple of quarters ago that we had too few new salespeople, and therefore, we did -- made investments to do so and which should turn into growth in the future. We -- further growth in personalized video, further growth in voice and video, both of those markets are strong. And then as you see, as we've said many times, we're investing in the rich media, conversational messaging, RCS and OTT chat apps, to capture the new growth market potential. We're increasingly convinced about how strong those markets are, looking at our own performance in personalized video, looking at other companies' performance in those areas. We see a strong growth well above our average in the new messaging areas, and therefore, we feel confident in investing in those areas, both on the go-to-market, that's marketing side, and on the technology side. With that said, I want to thank you all for participating on this call and open up for questions.
[Operator Instructions] Your first question comes from the line of Fredrik Lithell from Danske Bank.
Two questions, if I may then. On messaging, you talk about you're pushing the focus away a little bit from wholesale and onto -- directly to end enterprise customers. Can you describe a little bit more over the sort of 2-year period or 3-year period, how that will progress and how we should see that, because I mean, you are doing a lot of transactions on the wholesale basis? So how will that develop? If you could expand on that, it would be great. And the second thing, investments. You talked about the investments. We can see the headcount and the consultants coming in and helping. When do you think you're on a sort of a correct level to facilitate through all the investments you want to do? Should we expect that the headcount will continue to increase with 15%, 20% per year, because you will always get into a situation you see new investments? Or do you feel you're coming to a situation where you have a platform that will be able to cater for the investments you see for a 2-, 3-, 4-year period? It will be great.
Thank you, Fredrik. I think we'll give the first question to Roshan and then have Oscar answer the second one.
Yes. I think, Fredrik, on your first question. On the shift to enterprise, I think to remember that this company has -- I think we've been growing its enterprise customer base for quite some time, and we see the good results of that in the gross profit growth. I mean, if we talk about the U.S. big tech companies, for example, or also -- yes, mainly in the U.S., I think, where we've had good success in getting enterprise customers. I mean, I think it's difficult to forecast exactly how this development will take place, but our aim is to keep and be -- continue to be relevant in our cost leadership in the wholesale customer base. What we are seeing is that we can add more enterprise customers and definitely deliver more software and value and -- at higher margins to the enterprise customer base, which will drive future growth. I think that's sort of.
Yes. Sorry, if I can just follow up there. Is it fair to assume then sort of that the transaction volumes and maybe your revenue, your top line, will sort of grow slower irrespective of how much it will grow, but it will grow slower than your gross profit will grow? Is that a fair assumption if you take a 2- to 4-year horizon on it?
I think we don't -- I mean, it's difficult to forecast so long -- so long forward. I think if we look in the near term, that's definitely the trend that we are seeing. And yes, and I think it's -- the good part is that the messaging market is continuing to grow, and we will continue to play a strong role in this. And I think our focus will be on winning more enterprise customers, but we want to keep our wholesale customer base and our cost leadership. Then I think looking at over a 3-year period, it's really difficult to forecast how that plays out. But in the near term, yes. That's probably how it will be.
All right. Then on the second question. Well, as -- I can't make forward-looking statements, but I can comment on our logic when we make those investments, which will probably guide you in how we think. So what we're doing is obviously we're -- now we have -- we're looking at what is the payback and what is the traction of the investments we're doing. So when we thought for a couple of quarters ago that we needed to start investing in those areas because we see a lot of traction, and now we have done that and the level of investments going forward will hinge very much on how successful are we in driving gross profit based on those investments, basically. If we see very high growth in those investments, we're likely to invest more. If we see lower growth, then we're likely to take it down. So I think it's going to be very much bound to the market traction on the new investment area. The other constraining or fact that we are obviously living within is, is what is the general gross profit growth in our company. If we continue to grow gross profit in general and EBITDA in general in a good way, then we have obviously a larger space to decide do we want the likelihood for profits tomorrow. So that's the 2 factors that we're scaling with here. And we are -- as you can imagine, now we have pushed pretty hard on the investment area. And we're, right now, in the discussion of what's the right level going forward for shareholder value? And we're doing that in a responsible way. And it's really those 2 factors, how much EBITDA do we want to generate today or tomorrow, if that will and how much do we want to increase the likelihood of high growth in a couple of quarters out? And that's the balance we're trying to strike in the way that is best for the shareholders. So I think that's the 2 things that you're seeing and the 2 things that we are weighing.
Okay. Very clear. And just a housekeeping question, if I may. In the cash flow, the earn-outs you had in this quarter, are there any earn-outs left in -- due to the contracts on the acquisitions before? Or are we -- do we have them behind us?
So I think there is some information in the report on that. We can come back, but it's duly stated, but we'll connect off-line with Vehicle there. It's all in the report.
[Operator Instructions] There are currently no further questions, please continue. We've just had another question from Fredrik Lithell from Danske Bank.
I can continue if you don't have any other ones asking questions then. A little bit on the other 2 segments besides messaging. On operator side, you are up at a higher gross margin now for 2 quarters. Is this sort of the level, just above 90%, we should expect? I mean, Q2 wasn't the strongest of quarters, but you had a higher gross margin. Could you sort of put some time on the gross margin for Operator Division going forward, please?
Give us one moment there, Fredrik.
Yes. I mean, I think, Fredrik, just a very quick response on that one. The operator -- I mean, the operator segment is, of course, depending on what specific products we are selling. We're selling software solutions to mobile operators to enable them to provide value-added services to their end customers as well as for quality and charging reasons. And I think it can -- the gross margin can vary depending on exactly sort of which customers, which part of the world and which products that we are selling from quarter-to-quarter. In general, we see a very good strong gross margin within this area at around 90%, and I think we have a strong sales pipeline both within our traditional products, but also now when we offer RCS-as-a-Service, where there's strong interest in that product as well.
But is it so -- sorry, is it so that SaaS is not a very big share of revenues right now, but when it grows, it will also help the gross margin, I guess, because every time you get the monthly revenue from -- in a SaaS model, you don't really have any costs associated to that. So will that help gross margin when that is more relevant?
If we're staying -- are you referring to the Operator Division?
Yes, exactly, sorry.
Yes. So I mean, I think you're correct in the sense that there's a gradual shift in business model in parts of that business, but we shouldn't exaggerate the pace there. RCS-as-a-Service has that logic, I mean, in the way that, that commercial offer is phrased, exactly as you described. However, it's at a very early stage. We launched this product type offer in spring, so it will take some time before that has a material impact.
And your next question comes from the line of Daniel Djurberg from Handelsbanken.
Daniel Djurberg, Handelsbanken. Sorry for coming late into this call, there's another call I had to take. The question might already have been asked, I was thinking a little bit about voice and video. If you could talk about the growth you've had there in number masking and verification. Is that pure connected to a handful of customers? Or is it like 1 or 2? And should we expect this growth to continue out to more of a positive trend from a number of customer? Or will it start to decelerate the course so that we have -- comparing apples-with-apples year-over-year?
Oscar, we'll leave that to you.
Yes. I didn't really understand the last comment -- except for the fact that we're comparing apples-to-apples.
More or less the growth prospects you see in voice and video from the number masking and verification. We have seen really strong...
Yes. No. I mean, we are seeing strong growth prospects in number masking and verification. And as we've alluded to, we're also seeing, when you sign-up a handful, it's not one, it's a handful of big customers, that -- when you do this type of turn, you focus on a handful of big customers in order to get focused. So we also say that we needed to focus a lot on these customers in this period in order to serve them with new product and market requests and in order to serve their growth. So it's a handful or a set of customers. It's a very good customer base. We see good growth prospects, but we also see that we need to focus on these customers to nail them home and in 100% in this type of growth -- sort of growth scenarios before we can fully unleash the full sales power in order to hunt a very large number of new customers. We are signing new customers and are focused on new customers, but it's a little bit less focused right now due to one thing, to serve the existing customers in a very good way.
Okay. And jumping over to operators, I have a question on 2 things, really. The first thing is you mentioned the improved conversion orders to sales. Can you say something about pipeline in operator segment year-over-year? Is it a trend also, the RCS as-a-service, your model there, really in terms of revenue model, how is it working?
Thank you. Oscar, do you want to answer this?
So pipeline, yes, we see a good and strong pipeline in operators, on a historic high level. And then it's -- as you know, in those type of businesses, it's then all about the order to go -- conversion into orders. So yes, we see a strong pipeline. Now we need to turn it into orders for H2. So that is what we see. And we also see that we can -- we're able to address larger operators when combining the brands. From Symsoft to Sinch, it becomes a more credible partner for larger operators, we see that possibility of doing so. Then larger operators obviously come with a kind of higher cost to serve and obviously higher revenue as well, but we see that shift is clear. With regards to RCS-as-a-Service, was your question about the pipeline or the revenue model?
More about the revenue model, how -- is it pure? Do you get a different kind of -- both upfront and then revenue share? Or how is that working?
Yes. I mean, it's all of the above. We tried to set the revenue model as an upfront to cover the costs and as a monthly fee to cover the -- upfront to cover the upfront costs and the monthly fee to cover the monthly costs or the recurring costs and then have the upside based on the revenue share or SaaS fee, if you will. It's a Software as a Service offering, so it's a take-based fee and where you have the majority of the upside. But we tried to set it up so that we can cover the costs, but then have a significant upside if things go well.
And can you remind us if you have announced any official orders there, on any names or references as of yet?
On RCS-as-a-Service, we have not announced an official...
There are currently no further questions. Please continue.
If there are no further questions, I think we'll wrap up here. Thank you, everyone, on behalf of all of us here in the management team, for listening in and looking forward to speak again after our Q3 results. So thank you very much and goodbye for now.
Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.